Weekly Outlook on Copper - 20 Jan 2023

Base metal prices surged higher on Friday, as a weaker dollar and hope of a slower rate hike supported prices. China kept benchmark lending rates unchanged for a fifth month as expected, but future cuts are possible as the central bank has pledged to support Covid disrupted economy. 

During the week, copper prices rose to its highest levels since June as speculators bet that low inventories and rising Chinese demand would lift prices. 

Protests in Peru are threatening to choke off almost 2% of global copper supply. The third largest copper mine, Las Bambas in Peru’s has not dispatched copper concentrate since Jan. 3 due to security concerns.

                                                           Weekly outlook on Copper

LME copper prices rallied on positive sentiments and expectations of demand from the top buyer, China. Prices gained more than 3% in the initial three days of the week, but after that, prices fell on Thursday, as the dollar index firmed on U.S. downturn concerns and physical metal demand slowed ahead of a long holiday in China on the occasion of the Lunar Year festival. On the Friday session, the price managed to trade at the 9366 mark with slight gains. On a weekly timeframe, the price has been finding resistance at 61.8% FR, which indicates an immediate hurdle for the counter. A stochastic indicator is hovering in highly overbought territory that suggests a correction for the near term. On the downside, the LME copper has support at 8918 levels while, on the upside, immediate resistance is at 9550 and next will be at 9770 levels. 

On the MCX front, the copper prices have been rising consecutively for the last four weeks without enabling selling pressure and managed to surpass the immediate hurdle at 745 marks. Currently, copper is trading in Higher Highs & Higher Lows formation with volatile moves on the daily chart. The price is also moving above all the important Moving Averages and Indicators, like Ichimoku Cloud, Williams%R etc. However, the momentum indicator RSI is at 75 levels, in overbought territory and indicating negative crossover on the daily scale that suggests some corrective move in the counter.     

Hence, based on the above mixed parameters, we are expecting some profit bookings in MCX Copper for the coming week. However, the overall trend remains bullish, so traders are advised to trade cautiously for the coming week. On the higher side, it has a resistance at around Rs. 790/805 levels. While, on the downside, immediate support is at Rs. 760 & 745 levels.

Important Key Levels: